Sportfisherman Charter, Inc. v. Norberg

Mr. Justice Joslin,

with whom

Mr. Justice Kelleher

joins, dissenting. The question before us is whether the taxpayer, who in 1970 acquired a .boat for use in its business of chartering boats for sportfishing, is liable for a sales tax measured by the rental payments received from chartering that boat or for a use tax based upon its cost price. Neither .party disputes that under the pertinent taxing statutes boats should be treated no differently from other tangible personal property, and that the same prin*76ciples obtain here as would apply if the taxpayer were an automobile rental agency like Hertz or Avis and the property rented were an automobile instead of a boat.

The positions taken by the parties are straightforward, uncomplicated, and substantially in accord. Implied in their briefs and oral arguments is their agreement that a “sale” as defined by G. L. 1956 (1970 Reenactment) §44-18-7 (A) includes a rental or lease of tangible personal property1, that a retailer regularly engaged in the business of renting tangible personal property for a consideration may acquire the rental property tax-free by furnishing his supplier with a resale certificate prescribed by §44-18-25, that such a retailer is obliged under §44-19-1 to obtain a sales tax permit, and that he must add to the rentals charged a sales tax at the rate imposed by '§44-18-19. Regulations issued by the .administrator concur with those positions.2

*77The .parties disagree only on whether, and if so under what conditions, a retailer regularly engaged in the business of renting tangible personal property who fails to pay a sales tax on rental receipts within a specified time becomes liable for a use tax. The administrator contends that §44-18-273 and §44-19-104 do not distinguish between such a retailer and one engaged in the business of selling tangible personal property who incidentally rents such property while holding it for sale. He further argues that those sections, fairly read, require (1) that a retailer, whether engaged in the business of selling or renting, elect *78on or before the 20th day of the month next following acquisition of the property to pay either a sales or a use tax, and (2) that failure to do so results in a relinquishment of that right of election to the administrator, who in this case opted to impose the use tax.

In response, the taxpayer indicates at the outset that the administrator’s position in this case and that promulgated in his regulations are at odds.5 It argues further— and I find its argument the more convincing — that §44-18-27,6 if read in pari materia with §44-18-26,7 makes clear that the election provided therein applies only to retailers engaged in the business of selling tangible personal property who make incidental rentals pending sale, and not to those engaged in the business of renting such property to consumers.

For reasons that I find difficult to fathom, the majority reject the contentions of both parties, ignore the department regulations, and proceed on a tangent of their own leading them to the same result reached by the administrator. They conclude “* * * that §44-18-7(A) was intended to exclude short-term rentals * * * from the defi*79nition of a sale and thus from the ambit of the sales tax,” and that because the taxpayer’s rental income therefore does not come within the exemption created by §44-18-348 it is subject to a use tax. Obviously, those conclusions can be no sounder than their foundations, and they seem to me to be based on an unusually labored construction of clear and unambiguous language, which conveys a plain, sensible, and contrary meaning that is accepted both by the taxpayer and by the administrator in his department regulations. See notes 1 and 2, supra. Once it is thus accepted that §44-18-7(A) means what it says when it defines “sales” as including a “rental,” and that a tax based upon rentals must be collected by those engaged in the rental business, it necessarily follows that §44-18-34 exempts such a retailer from paying a use tax based upon the acquisition cost of the rental property.

I rest my disagreement with the majority, however, not only on their construction of §44-18-7(A), but also on their total disregard for what the administrator conceded in oral argument was the longstanding department practice of requiring persons regularly engaged in the business of renting tangible personal property to collect sales taxes from their lessees based upon rental charges. That practice is confirmed by the department regulations.9 I recognize, of course, that the administrative practice and the department regulations do not have the force and effect of law, and that they serve merely as guideposts for the *80benefit of the taxpayers and the department entrusted with the duty of enforcing the sales and use tax law. But if the meaning of §44-18-7(A) is doubtful — as the majority contend it is — that practice and those regulations should receive great weight from us in resolving that section’s ambiguity, particularly in this instance because they have endured the legislative reenactment and amendment of those statutes giving rise to their adoption. See 3 Sutherland, Statutory Construction §66.04 at 192-93 (4th ed. 1974); Trice v. City of Cranston, 110 R. I. 724, 730, 297 A.2d 649, 652 (1972); Broderick v. Keefe, 112 F.2d 293, 296 (1st Cir.), cert. dismissed, 311 U.S. 721, 60 S.Ct. 1107, 85 L.Ed. 470 (1940); Liss v. Goodman, 224 Md. 173, 179, 167 A.2d 123, 126 (1960); In re Gillmore’s Estate, 101 N. J. Super. 77, 85, 243 A.2d 263, 267 (1968).

John G. Coffey, Jr., for plaintiff-respondent. Richard J. Israel, Attorney General, W. Slater Allen, Jr., Asst. Attorney General, Perry Shatkin, Principal Legal Officer (Taxation), for defendant-petitioner.

For these reasons I reject the majority’s rationale, and because I believe the taxpayer’s position more soundly premised than .the tax administrator’s, I respectfully dissent.

GeneraI Laws 1956 (1970 Reenactment) §44-18-7 (A) defines “sales” as follows:

“A. Any transfer of title or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means of tangible personal property for a consideration. ‘Transfer of possession,’ ‘lease,’ or ‘rental’ includes transactions found by the tax administrator to be in lieu of a transfer of title, exchange, or barter.”

The summary of the Rhode Island Sales and Use Tax Act found in the regulations issued by the tax administrator says that the sales tax applies to:

“(e) The leasing or renting of tangible personal property, such as bicycles, typewriters and other business machines, trucks, automobiles * * * and other personal property.” Regulations, Rules & Bulletins Issued by the Tax Administrator under the Sales & Use Tax Law at 9 (1968).
Those regulations also provide that:
“Under the provisions of Section 44-18-7 of our sales and use tax law the word ‘sale’ is construed to mean an actual transfer of title or rental or lease of tangible personal property by a person who is regularly engaged in the business of making sales of tangible personal property and/or regularly engaged in the business of leasing or renting tangible personal property.
*77“Accordingly, both such persons are obliged to obtain a sales tax permit; both are obligated to add and collect the tax based either on the selling price of the property sold by them or based on the rental charge made by them.
“Moreover, both may acquire such property (to be sold or rented or leased by them) from their suppliers tax-free by furnishing such suppliers with resale certificates.” Regulations, Rules & Bulletins Issued by the Tax Administrator under the Sales & Use Tax Law at 69 (1968).

General Laws 1956 (1970 Reenactment) §44-18-27 says:

“If the sole use of the property, other than retention, demonstration, or display in the regular course of business, is the rental of the property while holding it for sale, the purchaser may elect to pay 'the tax as measured by the amount of the rental charged rather than as measured by the cost of the property to him. Upon a subsequent sale of such property, however, the person making the sale shall include the full amount of the selling price in his gross receipts and shall pay the tax thereon.”

General Laws 1956 (1970 Reenactment) §44-19-10 provides in pertinent portion that:

“The taxes imposed by chapter 18 of this title shall be due and payable to the tax administrator monthly on or before the twentieth day of the month next succeeding the month for which return is required to be made. On or before the twentieth day of each month, a return for the previous month shall be filed with the tax administrator in such form as said tax administrator may prescribe. For purposes of the sales tax a return shall be filed by every person engaged in the business of making Tetail sales, the gross receipts from which are required to be included in the measure of the sales tax.”

Those regulations provide:

“Any retailer who fails to do so [make the requisite election by showing -that within the time prescribed by law he has included in his sales tax return the taxes measured by the cost of the property to him] shall be deemed to have elected to pay the tax as measured by the amount of rental charges which he makes.” (Emphasis added.) Regulations, Rules & Bulletins Issued by the Tax Administrator under the Sales & Use Tax Law at 70 (1968).

See note 3, supra.

General Laws 1956 (1970 Reenactment) §44-18-26 reads as follows:

“If a person who gives a certificate consumes or makes any storage or use of property so purchased other than retention, demonstration, or display while holding it for sale in the regular course -of business the storage, use, or consumption shall' be subject to the sales or use tax, as the case may be, as of the time the properly is ¿first so stored, used, or consumed, and the cost of the property; to .file .purchaser’ shall be the measure' of the. tax,”

General Laws 1956 (1970 Reenactment) §44-18-34 reads:

“The storage, use, or other consumption in this state of property, the gross receipts from the sale of which are required to be included in the measure of the sales tax, shall be exempted from the use tax.”

The administrator concedes that the substance of the regulations quoted in note 2, supra, was adopted in the form of a ruling at least as early as November 24, 1958, and reference to CCH State Tax Rep., R. I. ÍÍ63-872 (1969) reveals that it was promulgated as a regulation on December 1, 1965, if not before.